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View the article online at http://citywire.co.uk/wealth-manager/article/a753885

Stout blasts industry 'short termism' as he buys EM

by Eleanor Lawrie on May 30, 2014 at 15:00

Stout blasts industry 'short termism' as he buys EM

Bruce Stout’s shareholders have stood by him during his first year of under-performance since taking over the £1.3 billion Murray International investment trust a decade ago, after it was harmed by emerging market turmoil.

Managed by Stout (pictured) since 2004, Murray International's share price total return has fallen by 8.5% in the year to April, trailing the benchmark (composed of 40% FTSE World UK and 60% FTSE World ex UK), which made a 7.7% gain.

Over five years, the trust is still up 102.1% versus a benchmark return of 88.5%, however.

Stout said he was not fazed by the short term dip, which he said was down to the relative underperformance of emerging markets compared with developed regions in 2013.

‘The poor relative performance is because developed markets have done so well – the US is up 30%, UK up 22%, Europe up 25% – but it’s just price-to-earnings expansion,’ he said.

‘Last year, during the relative underperformance of Murray International, there were many companies we owned who did exactly what we expected so in absolute performance there was no money lost, but the share price did not do anything, so from a market perspective it was disproportionate,’ he said.

‘But that does not mean you should change your process, because these periods happen.’

A consistently strong pound has also cost performance. ‘For the last five years, the relentless rise in sterling, which is now close to a five-year high, has been a drag on absolute performance because 87% of our assets are outside of the UK, so that has been a headwind. But currencies don’t go in a straight line forever,’ Stout said.

Industry’s fickleness

The manager is also scathing of the financial services industry’s focus on short term achievements.

‘Fund management is like football, you’re only as good as your last quarter. People are all long term until you underperform, then they are all short term. Our shareholders are mainly retail and understand the trust and the majority are in for the long term. The shareholder base is strong, but the industry can look very short term,’ he said.

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